By Benjamin Parkin

Cattle futures tumbled Monday on expectations of higher supplies early next year.

The U.S. Department of Agriculture said on Friday that feeders placed 3% more cattle in lots for fattening in August than a year earlier, while analysts had expected the rate of placements to fall by 3%.

That pressured a market that had rallied in part on expectations of lower slaughter-ready cattle supplies early next year. It prompted heavy selling in cattle futures on Monday as traders revised their expectations.

December live cattle futures fell by their daily limit of 3 cents, or 2.6%, to $1.14425 a pound at the Chicago Board of Trade. The most-active October contract fell 2.1% to $1.09225 a pound.

Feeder cattle futures were also sharply lower.

The USDA's report was "a very negative surprise," said Dennis Smith at Archer Financial Services. Record-high fourth quarter production was likely to continue into higher output early next year too, he said.

In a separate report, the USDA said frozen beef stocks in August rose by 10% from a month earlier, also above analysts' expectations. That was the largest increase in August beef inventories in 15 years, said Ken Morrison, a trader and author of commodity newsletter Morrison On The Markets, in a note to clients.

The pessimistic outlook for cattle and beef supplies overshadowed higher cash-market prices last week. Meatpackers paid an average of $108.49 per 100 pounds on a live basis and $170.59 dressed, several dollars higher than a week earlier, amid a short-term supply pinch.

Hog futures bounced on Monday, finding support from higher pork prices at midday and as traders bet against the cattle market.

But the near-term outlook is expected to pressure prices, particularly in the cash market. Hog weights, slaughter numbers and pork production all increased last week.

CME October lean hog futures rose 1.1% to 56.325 cents a pound.

Write to Benjamin Parkin at benjamin.parkin@wsj.com

(END) Dow Jones Newswires

September 25, 2017 15:47 ET (19:47 GMT)

Copyright (c) 2017 Dow Jones & Company, Inc.